Program
Review and Investigations Committee

Minutes

<MeetMDY1>September 8, 2005

The<MeetNo2>September 8, 2005 meeting of the Program
Review and Investigations Committee was held at<MeetTime>10:00 AM, in<Room>Room
131 of the Capitol Annex. Senator Ernie Harris, Chair,
called the meeting to order, and the secretary called the roll.

Guests: Steven Sparrow, Oldham County Sheriff and
President of the Kentucky Sheriffs Association; William May Jr., Mayor of the
City of Frankfort and Executive Director of the Kentucky Sheriffs Association;
and Melinda Wheeler, Director, Administrative Office of the Courts.

Minutes of the August 11, 2005 meeting were approved,
without objection, by voice vote upon motion made by Rep. Arnold and seconded
by Sen. Pendleton.

Sen. Harris asked staff person Kara Daniel to summarize the
different types of warrants from the report Improved Coordination and
Information Could Reduce the Backlog of Unserved Warrants.

Ms. Daniel explained that complaint warrants are initiated
through a complaint process; bench warrants are initiated generally by the
court; and indictment warrants, which usually involve felonies, are issued by
grand juries.

Sen. Seum asked if a complaint warrant could involve a
felony.

Ms. Daniel stated that was correct.

Ms. Daniel added that the data contained in Appendix D of
the report was for bench and indictment warrants.

Sen. Harris asked if a complaint warrant could lead to a
felony.

Ms. Daniel stated that a complaint warrant could lead to a
felony indictment.

Sen. Harris asked if a complaint warrant could also be
issued for a misdemeanor offense as well as a felony.

Ms. Daniel stated that was correct.

Sen. Seum asked if the percentage of unserved warrants would
change if the number for unserved felony complaint warrants was added to the
number of felony warrants not served.

Ms. Daniel stated that would be correct.

Mayor William May Jr., Executive Director of the Kentucky
Sheriffs Association, then commented on the report. He stated that even though
the counties were listed [in Appendix D] as not serving warrants in a timely
manner, it did not mean that the sheriff’s office was not trying to serve the
warrants. He stated that inaccurate information listed on the warrant or
persons moving outside the county could be factors in not serving warrants. He
stated that the size of the county and lack of staff could also contribute to
the slow process of serving warrants.

Mr. May stated that the association agreed with
recommendation 2.14. He stated that the arrest fee for misdemeanor warrants had
been increased from $10 to $30, per language contained in Senate Bill 105.

Mr. May stated that the Association agreed with the
recommendations regarding the implementation of a statewide e-Warrant system.
He stated that the association would be willing to help draft legislation for
the e-Warrant system.

Mr. May stated that the association also agreed with
recommendations 3.7, 3.8, 3.11 and 3.12.

Sen. Seum asked if sheriffs were usually alone when serving
warrants.

Steven Sparrow, Oldham County Sheriff, stated that a sheriff
or a deputy was usually alone when serving warrants, except in the case of a
felony warrant.

Sen. Seum asked if the sheriff’s office received a fee for
serving the warrant.

Sheriff Sparrow stated that a fee is charged for serving a
warrant.

Sen. Seum asked if the fee for serving a felony warrant was
more than the fee for serving a misdemeanor warrant.

Mr. May stated that the fee for serving a misdemeanor
warrant was $30.

Sheriff Sparrow stated that the fee for serving a felony
warrant was $20.

Sen. Seum asked why the service fee was more for a
misdemeanor warrant than a felony warrant.

Sheriff Sparrow stated the fees are legislatively mandated
and added that the association was in the process of drafting proposed bill
language to increase the amount for serving felony warrants.

Sen. Seum asked if sheriffs’ offices were serving
misdemeanor warrants before felony warrants because of the difference in the
fee amounts.

Mr. May stated that some sheriff offices could be doing
that.

Rep. Nelson asked if law enforcement officials in rural
counties were utilizing constables for serving warrants.

Sheriff Sparrow stated that some rural counties were using
constables for serving warrants.

Sen. Seum stated that he was concerned with the number of
unserved felony warrants in Jefferson County. He also stated that more effort
needed to be put in serving felony warrants rather than misdemeanor warrants.

Sen. Seum asked if sheriffs would be required to serve
warrants stemming from smoking violations in Jefferson County.

Sheriff Sparrow stated that sheriffs would be required to
serve those warrants.

Mr. May stated he hoped that the sheriffs would look at the
priority of serving a felony warrant before serving a misdemeanor warrant.

Sen. Harris asked if the association had spoken to officials
listed in the low- ranking counties as to why they were not serving warrants.
He asked that the information contained in Appendix D be shared with officials
in the counties listed as doing poorly in serving warrants.

Mr. May stated that the information would be shared with
officials of the Kentucky Sheriffs Association meeting later this month.

Sen. Harris asked that the association review the
information contained in the report, and pursue legislation to implement
changes.

Mr. May stated that the association would continue to work
with the Program Review staff to improve the warrant process.

Cindy Upton, Program Review staff, then presented a
follow-up to the report Uncollected Revenues and Improper Payments Cost
Kentucky Millions of Dollars a Year.

Ms. Upton stated that the report, which was adopted by the
Committee on September 9, 2004, is a high-level review of major state dollars
that were not being collected or were being spent improperly or unnecessarily.

Ms. Upton stated that the report concluded that improvements
could be made in four major areas:

1. Collection of court-imposed fines, fees, and costs;

2. Collection
of amounts owed to the Medicaid Program and control of improper payments
made by the Medicaid program;

4. Oversight
and assistance by the Finance and Administration Cabinet in collecting money
and controlling improper and unnecessary payments.

Ms. Upton stated that the report included 26
recommendations, which could take years to implement, but the potential benefit
to the Commonwealth’s economic condition could justify the effort. She stated
that additional staff and other resources could be necessary to coordinate the
statewide approach.

She explained that one reason it could take so long is that
agencies are not accustomed to working with each other to collect money that
may go to the general fund rather than to their individual agency. She said
that they were also not accustomed to identifying and reporting improper
payments. Agency leaders would have to understand the benefit to the state as a
whole for collecting debts and preventing improper payments. She said that the
Finance and Administration Cabinet would be the logical leader in educating
agency leaders.

Ms. Upton said that once agency leaders bought into the
idea, then they would have to make sure their personnel understood the
requirements and their responsibilities.

She said that a wider audience for the Program Review report
would be helpful. The report integrates the provisions of HB 162 and SB 228;
describes federal agency requirements that are similar to, but wider in scope
than the two bills; and summarizes best practices from other states. She stated
that with the right people in place, agencies will also need information
systems so they can accumulate information and communicate it to each other.

Ms. Upton explained that the Finance and Administration
Cabinet has an important role in implementing many of the report’s
recommendations. She said that the Cabinet had taken the lead in coordinating
efforts to prevent improper payments and collect debt. She stated that the
Controller issued a preaudit manual to help prevent improper payments, and
developed a regulation to help state agencies identify and reduce improper
payments. She said that the Controller also developed training materials for
an internal control and preaudit workshop for state agency personnel.

She said that the Department of Revenue was helping agencies
collect debts. She stated that agencies are required to report year-end
information on debts with the closing package information. The Department of
Revenue reviews that information to identify and prioritize agencies, and then
meets with agencies of significance to discuss their receivables and collection
process.

Ms. Upton stated that the Department of Revenue set up pilot
projects, which allowed them to learn more about the agencies, and what will be
required to collect the debts. Because a manual system is not cost effective,
the Commonwealth Office of Technology is working on an interface that will
allow any agency to electronically refer debts to Revenue. She stated that
Department of Revenue already has an electronic interface with Child Support
that allows Revenue to electronically receive information and begin collection
procedures. She said that the Department of Revenue collected over $3 million
in delinquent child support payments last fiscal year.

Ms. Upton stated that Department of Revenue also conducted a
pilot project with the Department for Community Based Services to collect
overpayments on food stamps and cash payment cases, and had collected
approximately $24,000, or 8 percent of the debt referred.

She stated that Department of Revenue also has been working
with unemployment insurance cases, the Kentucky Higher Education Authority, and
Medicaid. She said they also were continuing to meet with state entities to
work out the details, and so far agencies appeared to be putting forth an
effort to make the collection project work.

Ms. Upton also discussed the eight recommendations pertaining
to the court system for improving the collection of court fines, fees, and
costs. She noted that seven of the recommendations called for the
Administrative Office of the Courts (AOC) to consult with the Finance and
Administration Cabinet.

Ms. Upton said that the courts’ computerized bookkeeping
system has been implemented in 10 counties so far, but there is no plan for an
interim manual system to be used before all counties have the bookkeeping
system. She stated that AOC officials say that credit cards are now accepted in
11 counties and that credit card acceptance will be pursued aggressively. She
stated that AOC and Revenue have agreed that using criminal garnishments and
withholding state disbursements will be handled by Revenue. The two agencies
are working together to develop a strategic plan to collect debts owed the
courts.

Ms. Upton says that in response to the Program Review
report’s recommendation that AOC study other states’ best practices, AOC has
determined that using Revenue’s central collection unit is the best option.

Ms. Upton also discussed the responses of the Cabinet for
Health and Family Services to Chapter 3’s recommendations regarding Medicaid.
Ms. Upton said that cabinet officials report that insurance companies generally
comply with the requirement of KRS 205.623 that they provide coverage
information and data on claims paid on behalf of Medicaid-eligible
policyholders and dependents, but including a penalty for noncompliance would
be helpful.

She noted that the inspector general had described the new
field-based unit to investigate suspected eligibility fraud—Determining
Eligibility Through Extensive Review—at the August Program Review Committee
meeting. She also explained that the inspector general has added about 15 new
investigators and auditors for looking into suspected improprieties by
providers, contractors, and cabinet personnel. She said that the drug rebate
program is now being handled by a Medicaid contractor, which tracks current
rebates and interest receivable. The old amounts on the books have not been
resolved, in part because the employees with knowledge and experience to
resolve the disputed amounts have retired.

Ms. Upton stated that the report also noted how uncollected
child support affects not only the families but other programs as well. For
example, she stated that staff estimated that $8.1 to $36.5 million in state
and federal funds could have been saved in FY 2003 if noncustodial parents
provided health insurance as ordered.

Ms. Upton also discussed the effect of uncollected child
support on the SEEK funding formula for public schools. She stated that if a
noncustodial parent does not pay child support, the likelihood increases that
the children will qualify for free lunch and thus be categorized as at-risk,
which results in extra funding. She said that if child support collections were
increased enough to reduce the number of at-risk students by just 5%, the state
could save $6.8 million a year. She stated the report contained three
recommendations concerning child support.

The first recommendation was that there be a reexamination
of the costs and benefits of providing greater financial incentives to county
child support offices to improve enforcement of child support orders. Ms. Upton
reported that the Department for Community Based Services did not present a
cost-benefit analysis for staff’s review, but did use $800,000 in restricted
funds to draw down $2.4 million in federal funds to add to county attorneys’
contracts for FY 2006 under the equity plan. She reported that, related to the
second recommendation, the Cabinet for Health and Family Services has not
presented evidence that it has examined the consequences of allowing custodial
parents who receive K-TAP to keep some or all of their child support payments.
She said the cost would require additional general funds from the department,
but that Medicaid and other programs would benefit. In response to the third
recommendation, she said the cabinet has not provided an evaluation of whether
noncustodial parents who cannot provide dependent health insurance should be
required to provide some financial assistance.

In conclusion, Ms. Upton stated that improvements are being
made in controlling improper payments and unnecessary payments and collecting
debts, but that more needed to be done. She said that the committee may wish
to have a future update on progress.

Sen. Harris stated that a yearly update to the committee
would be appropriate since the implementation of the recommendations would be a
long-term effort.

Rep. Westrom asked how long it took for staff to compile
the report.

Ms. Upton stated that it took almost a year to complete the
report.

Rep. Westrom asked if staff had been requested to do a study
on the collection of unpaid taxes.

Ms. Upton stated that the Department of Revenue was in the
process of instituting an initiative to collect unpaid taxes at the time the
study commenced so the report focused on other issues.

Sen. Seum asked if noncustodial parents provided health
insurance as ordered, would there be an impact on the KCHIP program.

Rick Graycarek, Program Review staff, explained that the
estimate of total savings to the state was based on the number of medical
support orders that the court gave that required the noncustodial parent to
provide medical support. Staff found that in 95 percent of the cases, while
medical support was ordered, it was not provided by the noncustodial parent.
Mr. Graycarek said that staff looked at what would happen if those 95% of
medical support court orders were fulfilled in terms of its impact on the
Medicaid program. The estimate did not address how many of those children
would be enrolled in KCHIP, or what that impact might be.

Melinda Wheeler, Director, Administrative Office of the
Courts, stated that AOC was working with the Finance and Administration Cabinet
and other agencies to implement the recommendations contained in the report.
She stated that AOC has a concern regarding the use of credit cards as a form
of payment. She stated that in order to avoid the three percent service fee
paid to the credit card companies, AOC was implementing procedures for taking
payments over the Internet or the telephone.

Sen. Harris asked if those changes would require
legislation. He said that, if the courts only got 97 percent of the amount,
that seemed better than not collecting at all.

Ms. Wheeler stated she was not sure what was needed. She
said there are 11 counties that are on credit cards and they have collected
$63,780 through those. AOC has had to absorb $1,913.49 in fees from the credit
card companies. She said if they expand across the state, the state will
benefit by the use of credit cards, but AOC and the Court of Justice will have
to pick up that fee. Ms. Wheeler said she just wanted the legislature to be
cognizant of that and understand that they are going to try other methods so
they will not need additional funding.

Sen. Harris asked if committee members had any questions
regarding the proposed study topic, Legal Aspects of Eminent Domain in
Kentucky. He stated that the report would discuss the implications for Kentucky
arising from the recent U.S. Supreme Court case; provide an overview of state
law governing eminent domain, including how public use is defined; and
summarize actions by other states in response to the court’s decision.

Rep. Arnold asked if the report would be completed before
the next legislative session.

Sen. Harris answered yes.

The study topic, Legal Aspects of Eminent Domain in
Kentucky, was approved without objection, by roll call vote, upon a motion made
by Rep. Arnold and seconded by Sen. Guthrie.